Merck & Co has returned the rights to a late-stage antifungal to Anacor Pharmaceuticals following a review of its pipeline following the acquisition of Schering-Plough.

AN2690, which S-P licensed in 2007, is a topical therapy being developed for onychomycosis, a fungal infection of the nail and nail bed which is estimated to affect 35 million people in the USA. The partners have held an "end of Phase II meeting’ with the US Food and Drug Administration, manufactured the product and completed “certain Phase III preparatory activities such as stability testing and packaging design”.

Nevertheless, David Nicholson, head of worldwide licensing and knowledge management at Merck, noted that the firm is conducting “a comprehensive and rigorous prioritisation of our newly-combined pipeline”. He added that “this process has required us to make some challenging decisions”, and one of those means letting go of AN2690.

Under the terms of the original agreement, Anacor received a $40 million upfront payment and a $10 million financing commitment from S-P, while development, regulatory and commercial milestones could have exceeded $575 million. No financial details of the termination of the programme have been disclosed.

The parting of the ways does not seem to have been an acrimonious one and Mr Nicholson described the collaboration as being a productive one and Merck looks forward to “identifying other opportunities to work together in the future”. Anacor chief executive David Perry said “this Phase III ready' candidate targeting a large patient population represents a compelling opportunity for an underserved market”.

Late-stage trials will start as soon as the AN2690 programme is transferred from Merck to Anacor, which added that it will evaluate new partnering opportunities for the treatment.